- Should I buy instead of rent?
The benefits of buying a house rather than renting a house or apartment include:
- Tax breaks
- Financial gains
- Appreciation in value
- Equity
- Capital gains
- Freedom
- Security
- A sense of pride
2. Am I Ready to Buy?
Ask yourself the following questions when considering whether you’re ready to buy:
- Do I have a steady job?
- Have I been steadily employed for the last two to three years?
- Is my current income reliable for the foreseeable future?
- Do I have a positive bill-paying history?
- Do I have few outstanding long-term debts, like car payments?
- Have I saved for a down payment?
- Can I afford to pay a mortgage, taxes, utilities, and insurance?
3. How much do I need for a down payment?
Saving for the down payment is the greatest obstacle for first-time homebuyers. Lenders expect between 5% to 20% for a down payment. It varies according to the lender’s requirements, and the type and length of the loan. Make a budget, set a goal, and stick with the plan. Saving and sacrificing is how most people come up with their first down payment
4. What are the homeowners tax benefits?
- Typical deductions are mortgage interest and real estate taxes.
- In most cases, loan discount points and origination fees are deductible.
- Read Publication 530 titled Tax Information for Homeowners found on the IRS website.
- There are capital gains benefits, but don’t worry about that until you buy your first home.
5. What is the difference between pre-qualified and pre-approved?
Pre-qualification: Getting pre-qualified for a mortgage gives first-time homebuyers an indication of how much they “might” qualify to borrow. This mortgage amount is not guaranteed because no information has yet been verified. A letter from the lender may only state that you are “likely” to be approved for a mortgage.
Pre-approved: Better yet is getting pre-approved for a mortgage, which is based on a real credit score, and it also puts real estate agents and home sellers at ease. The buyer has more to offer when making a deal and in a competitive market this can be a definite plus.
6. How do I get the best mortgage?
It is time consuming to learn about the various rates and terms of mortgages. Once you find your dream home, there is not always adequate enough time to do your research. So do your homework prior to searching.
7. What is a seller’s market?
In sellers’ markets, increasing demand for homes drives up prices. Here are some of the drivers of demand:
- Economic factors – the local labor market heats up, bringing an inflow of new residents and pushing up home prices before more inventory can be built.
- Interest rates trending downward – improves home affordability, creating more buyer interest, particularly for first time home buyers who can afford bigger homes as the cost of money goes lower.
- A short-term spike in interest rates – may compel “on the fence” buyers to make a purchase if they believe the upward trend will continue. Buyers want to make a move before their purchasing power (the amount they can borrow) gets eroded.
- Low inventory – fewer homes on the market because of a lack of new construction. Prices for existing homes may go up because there are fewer units available.
8. What is a buyer’s market?
A buyer’s market is characterized by declining home prices and reduced demand. Several factors may affect long-term and short-term buyer demand, like: Economic disruption – a big employer shuts down operations, laying off their workforce.
- Interest rates trending higher – the amount of money the people can borrow to buy a home is reduced because the cost of money is higher, thus reducing the total number of potential buyers in the market. Home prices drop to meet the level of demand and buyers find better deals.
- Short-term drop in interest rates – can give borrowers a temporary edge with more purchasing power before home prices can react to the recent interest rate changes.
- High inventory – a new subdivision and can create downward pressure on prices of older homes nearby, particularly if they lack highly desirable features (modern appliances, etc.)
- Natural disasters – a recent earthquake or flooding can tank property values in the neighborhood where those disruptions occurred.
9. What is a stratified market?
A stratified market happens where supply and demand characteristics differ by price point, in the same area (typically by city). For example, home sales for properties above $1.5M may be brisk (seller’s market) while homes under $750k may be sluggish (buyer’s market). This scenario comes along every so often in West Coast cities where international investors – looking to park their money in the United States – buy expensive real estate. At the same time, home sales activity in mid-priced homes could be entirely different.
10. Where do I find lease to own and foreclosures?
The best source for the inside scoop on foreclosed properties in your area would be an experienced local realtor. The Daniels Team offers a great deal of knowledge and resources to buyers looking to purchase foreclosed homes.
Lease-to-own properties are different, as they don’t require the guidance of a realtor. These properties are entered into with a rental or lease agreement between a landlord and tenant. These agreements usually state that the property will be purchased by the tenant within a period of time(usually three years) and that a portion of the monthly rent payments will go toward the down payment for the purchase of the home. These are beneficial for individuals who are not quite ready to purchase a home, but will be ready in a short number of years. This gives the tenant ample time to financially prepare to have a mortgage, and become a homeowner.